Building a resilient economy

What is the news?

Amidst the hopes of a V-shaped recovery of the Indian economy, the National Statistical Office (NSO) had recently estimated that India’s economic growth has surged to 20.1% in the April-June quarter, despite a devastating second wave of COVID-19.

It also stated that the gross domestic product (GDP) had contracted by 24.4% in the April-June quarter of 2020-21.

Supporting these estimates, in its recently launched Trade and Development Report 2021, UNCTAD has estimated global growth to hit 5.3% in 2021 and growth in India to hit 7.2%.

What are the findings of the report? 

According to the report,

i). India showed a strong quarterly growth of 1.9% in the first quarter of 2021. It is despite severe second wave of the pandemic, rising food and general price inflation, drastic consumption and investment adjustments.

ii). India’s growth in 2021 as a whole is estimated at 7.2%, which is one of the fastest compared to most countries in the analysis. It is still not sufficient to regain the pre-COVID-19 income level. 

iii). Going forward, the economy is likely to experience a deceleration of growth to 6.7% growth in 2022. Beyond that, and even assuming the pandemic is fully under control, the situation is looking increasingly uncertain for many emerging economies.

What are the recommendations?

To revive and sustain growth, action is needed both at the international and national levels.

i). The report strongly supports India’s proposed temporary suspension of the World Trade Organization TRIPS waiver. It is a necessary step to enable the local manufacture of vaccines in developing countries. The inability of COVAX and CTAP schemes to mobilise the requisite resources from Northern governments and corporations, increases the need of such waiver. 

ii). We need a global strategy that mitigates the threat of global warming whilst simultaneously addressing the inequities and fragilities of a financialized world.

iii). New sources of finance are required, including support from the international community in line with its commitment to common but differentiated responsibilities. 

iv). At the national level, we can build resilience through public investment. COVID-19 has reinforced the idea that resilience is a public good and has to be delivered through a robust public sector with the resources to make the necessary investments.

v). We should not cut wages to boost competitiveness as wages are a critical source of demand and their growth can stimulate productivity.  

vi). Policies targeting informality are important for a country like India with a large informal economy.  

ix). Build a healthy, diversified economy through strong industrial policy focusing on building digital capacities.  

Source: This post is based on the article “Building a resilient economy ” published in The Hindu on 17th September 2021.